AI impact is yet to be fully understood, says Gala
An industry report says that 96% of executives in India across financial and professional services anticipate a rise in financial crime risks in 2025, yet only 36% believe their organization’s compliance program is “very effective”. The comparative global average is 71%.
Cybersecurity, AI, regulation, geopolitics and sanctions as the key factors driving fraud and financial crime threats in 2025, according to the report by Kroll, a leading independent provider of global financial and risk advisory solutions from New York.
The 2025 Financial Crime Report, released 9 April, says the APAC region has the highest average, with 82% of respondents expecting an increase in financial crime in 2025.
Potential reasons for ineffectiveness include:
• Lack of technology and investment – Only 36% strongly agree that their organization’s financial crime compliance program is sufficient in these respects.
• Weak governance – 40% strongly agree that their organization has a robust governance infrastructure for overseeing financial crime.
Cybersecurity (76%) and the increased use of AI by criminals (72%) are the leading catalysts for risk exposure in the coming year—cited nearly twice as often as other factors http://openai.com.
These include:
Increased incidence of predicate crimes (44%), financial pressure on individuals (48%), impact of remote working/decentralized management (44%) and slow technology implementation by financial compliance program (44%).
As adoption of AI and machine learning advances, only 32% of respondents now exploring these tools see a “very positive impact” on their financial crime compliance frameworks https://www.meity.gov.in/.
68% believe AI developments will benefit their financial crime compliance programs, while 52% agree AI poses a significant risk to compliance.
Fifty-six percent say the financial crime threat posed by cryptocurrencies is a moderate to significant concern in the coming year.
28% say their organization’s financial crime compliance program caters to risk associated with cryptocurrencies; 28% are planning to do so in the future.
A little over one-third of respondents say their financial crime compliance programs are “very prepared” to address geopolitical issues over the next 12 months, with the evolving sanctions landscape as one likely driver https://digitalinasia.com/.
Almost 5 in 10 respondents have high confidence in their program’s sanction-screening capabilities.
Fewer than 5 in 10 are very confident in their financial crime compliance program’s ability to evaluate supply chain threats.
The most prominent threats relate to cybersecurity (64%) and political instability (44%); 40 % respondents say their financial compliance program is “very prepared” to handle such threats in the coming year.
Cybersecurity leads the charge in risk exposure
Cybersecurity threats have been a growing trend in recent years, and the data shows that concern is on the rise and the perception of AI in financial crime compliance is shifting.
Over two-thirds (68%) of financial services professionals who expect financial crime risk to increase in the year ahead identify cybersecurity as the biggest driver of exposure and nearly half of organizations (49%) expect to invest in AI solutions as part of their efforts to tackle financial crime.
However, just one-fifth (20%) of respondents believe AI has had a “very positive” effect on their financial crime compliance framework – down from 37% in 2023.
Over a quarter (27%) of organizations have AI and machine learning as an established part of their financial crime compliance programs, exceeding 2023 levels (24%).
AI is primarily being used to identify suspicious behavior (63%), followed by network analysis (54%) and identifying risk signals (44%), as firms seek to enhance detection capabilities.
Evolving regulation raising concerns
Financial and professional services firms are preparing for greater enforcement action on regulations and evolving compliance challenges in 2025 – but a significant portion lack confidence in their ability to adapt, particularly with sanctions.
Over half (55%) of respondents expect enforcement action against financial crime to increase and nearly two thirds (59%) see corporate transparency requirements changing within the next year.
Nearly half of respondents (49%) say keeping up with regulatory changes is the biggest challenge in sanctions compliance, up from one-third (34%) in 2023.
Globally, just under two in five (39%) senior financial professionals say that they are “very confident” in their organization’s sanctions screening capabilities, with the U.K. (34%) trailing the global average.
While 37% of organizations screen entirely in-house, using a third party (34%) and hybrid approach (28%) are becoming increasingly common.
Geopolitical risks are high on the agenda
2024 was a year of notable geopolitical events and 2025 has already begun with arguably more disruption than was seen through last year. Indeed, organizations are factoring this into their ongoing compliance efforts.
Looking ahead through 2025, just one-third (33%) of respondents say that they are “very prepared” to address geopolitical risks over the next 12 months and only 38% are “very confident” in their financial compliance program’s ability to detect emerging geopolitical threats.
Among those who were less than “very confident” in their program’s ability to assess their supply chains for threats, more than half (56%) of global respondents identified cybercrime as the biggest challenge to their programs in 2025. This was followed by political instability (35%) and geopolitical risk (26%).
Tarun Bhatia, Regional Managing Director and Co-Head APAC Investigations Diligence and Compliance at Kroll, said, “From cybersecurity threats to geopolitical uncertainty, firms in 2025 are facing an incredibly complex risk environment.
“The changing nature of risk analysis means that businesses are expected to stay abreast of a variety of risk factors, but this becomes increasingly difficult, the faster that illicit actors develop new tricks and tools.
“From an India perspective, it is worrying that while almost all respondents (96%) expect financial crime risk to increase in 2025, only one out of three believe that their organization’s financial crime compliance program is very effective.
“Lack of technology investment and weak governance have been identified as the main reasons for heightened risks and the onus is on the boards and senior management to strengthen the governance framework.”
Vicky Gala, Associate Managing Director, Investigations Diligence and Compliance at Kroll, says, “The Indian government and regulators are taking multiple measures to ensure that relevant guidelines are suitably updated by bringing in amendments and new regulations to address challenges posed on account of increased dependence on technology.
“The overall impact of AI is yet to be fully understood, and the risk professionals are unsure about the benefits with almost half the respondents in India (52%) indicating that AI poses a significant risk to compliance. AML and Compliance professionals will need to be on top of their game, with the best tools, people and platforms, if they are to protect and grow their businesses.” Fiinews.com
